Aerolíneas halves deficit to US$247.1 million

State-owned airline still in the red but breathes sigh of relief, takes step toward profitability

State-run airline Aerolíneas Argentinas slashed its deficit nearly in half last year, with CEO Mariano Recalde reporting the company ended 2013 US$247.1 million in the red, or approximately 1.675 billion if converted into pesos with yesterday’s closing official rate.

Considering that the airline’s deficit weighed in 44.1 percent higher at US$441.7 million in 2012, and US$486 million in 2011, government allies were quick to point to the sharp drop as indicative of greener pastures ahead for the company.

Since the company was allocated 8.2 percent less in economic subsidies during the first 11 months of last year compared to the same period of 2012, the flagship airline’s path toward profitability and standing on its own two feet seems to be making relative progress.

Aerolíneas operated at an approximate US$677,000 loss per day last year, bringing the figure down from 2012’s US$1.2 million.

Nonetheless, the company was still assigned a towering 3.119 billion pesos up to November, 91.9 percent of which had been spent by the end of the month, according to the ASAP non-profit group.

During the 91 days between October and December last year, the company’s deficit clocked in at almost US$40 million, down 49.4 percent from the US$80.3 million seen in the same period of 2012.

The total amount dispensed on subsidies in the first eleven months of 2013 clocked in at 110.082 billion pesos, representing a 43.6 percent hike from the same period of 2012, according to ASAP. The reduction in Aerolíneas’ funding clearly goes against such a surging trend, and the airline’s improved performance will come as a relief for the government in the context of an acknowledged need to implement a more pragmatic spending policy this year in order to ease money-printing and inflation.

8.3 MILLION PASSENGERS

Speaking at a news conference staged to present the airline’s final quarterly report for 2013, Recalde emphasized that passengers, frequencies and destinations had also seen boosts throughout the year.

Flight frequencies, which increased by 5,960, and passengers aboard Aerolíneas planes, of whom there were 8.3 million, surged 16.3 and 19.1 percent, respectively.

The company thus flew 1.3 million more people than the seven million registered in 2012.

“This year the company will add more aeroplanes (to its fleet), will once again fly to all the provinces after 25 years and expects to reach 10 million passengers,” Recalde said, making reference to the longstanding plan of easing toward profitability and prioritizing service to citizens.

Revenue reached US$1.918 million, a US$342.1 million or 21.7 percent improvement on the US$575.9 million seen in 2012.

The president of the state-owned company said that “the production objectives established in the budget and in the business plan were met.”

Consulted on the airline’s competitive ticket prices, which led to a brief conflict with the long-haul bus industry last year, Recalde affirmed that “the government sets the rates for domestic flights,” while “international prices fluctuate according to the competition.”

INTERNATIONAL EXPANSION

Aerolíneas’ expansion this year may be limited by its lack of bases in Chile and Brazil, an issue that led to tension with LatAm Airlines’ LAN Argentina subsidiary in August last year after the ORSNA airport regulator tried to seize the latter’s hangar at the Jorge Newbery Metropolitan Airport.

With regard to international flights, Recalde confirmed March as the starting point for its route to Curitiba, Brazil, coming just in time for the soccer World Cup in the neighbouring country, which is scheduled for June.

Furthermore, Aerolíneas will strive to consolidate its flight to New York, strategically resumed by the company after United Airlines decided to drop Buenos Aires.

Another market that remains as a potential opportunity open to Aerolíneas, albeit no comment was made on the destination, is South Africa, as South African Airways recently decided to suspend the only direct service connecting the two countries.

Recalde explained that the recent decision to end services to Australia was made “because costs were very high and we did not have good results,” adding that another objective is to “strengthen flights to Europe.”

With collective wage negotiations coming up for the public sector, Recalde maintained that wage hikes for the company’s more than 10,000 employees were agreed to in October last year, so “we don’t expect there to be news until October this year.”